Thursday 29 September 2016

I overpaid my property tax: will the Revenue give my money back?

Brian Keegan

Published 24/05/2015 | 02:30

Brian Keegan
Brian Keegan

I sold my home last month. Its value - it is in a sought-after area in Dublin - went up considerably since 2013 - when I had to declare its value for property-tax purposes.

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Back in 2013, when I declared its value for property-tax purposes, I based that value on what similar houses on the same street were selling for at the time.

When closing the sale of my home last month, the buyer's solicitor informed me that a higher property tax was due for the property.

I paid the balance due for 2015 as a result - but was then informed that I would also have to pay the balance (of the higher tax) for 2013 and 2014, even though my property was worth a lot less in those years than it was when I sold it.

As I wanted to ensure that the sale went through, I paid the extra tax for those years - but I don't agree that I should have done so.

Can I make an appeal to Revenue? And what are my chances of being successful?

Don, Clontarf, Dublin 3

It sounds like you may have overpaid local property tax (LPT) in error. The valuation you gave in 2013, provided it was correct at the time, applies for the following three years as well.

It doesn't matter that the value of the house went up since you declared the 2013 valuation to Revenue. The LPT for 2013, 2014, 2015 and 2016 is based on the correct value on May 1, 2013.

Even though you can make LPT returns and payments online, you cannot apply for an LPT refund online. Instead you will have to make a claim in writing to the Local Property Tax Branch, Revenue Commissioners, PO Box 1, Limerick. When making the claim, you should explain how the error arose.

It will improve your chances of success if you include evidence that your original 2013 valuation was correct. This evidence might include, for instance, information on comparable properties sold in the local area around May 1, 2013 from the Residential Property Price Register, or perhaps a professional valuation of the property at that time.

When Norwich Union became Aviva in 1992 I received some free shares, as I had a policy with them. On the advice of my accountant, I also bought more shares and now hold 1,600 of them.

I don't know how many shares were free or purchased. If I sold them now, what tax would I be liable for?

Greg, Dundalk, Co Louth

Most personal investors will pay capital gains tax on the sale of shares. A person's shareholding in a company has often built up over time or may have been adjusted upwards or downwards by various share offers or reorganisations.

There are special rules for share sales. The most important rule for calculating the cost of any shares sold is the FIFO (First In First Out) rule. The idea is that the shares which were first acquired are treated as being the shares first sold.

In this situation, the free shares from Aviva would be regarded as the ones being sold first. Capital gains tax at 33pc would be paid on the difference between what you paid for them (zero in this case) and what they were sold for. The tax on each batch of shares you bought after that has to be calculated separately.

My brother and I would like to buy some land which also contains a house. I would like to retain the house while my brother is interested in the land.

I am wondering if there are any tax implications if I were to purchase both land and house in my own name and then sell the land to my brother.

Or would it make more economic sense to purchase the land and house jointly with my brother and then register ownership of the land and house in our separate names. Both the land and house are of similar value and are not being sold separately.

Gemma, Lusk, Co Dublin

Generally speaking, when looking at land transactions involving other people there are two taxes you have to consider - capital gains tax and stamp duties. You want to make sure not to create any liabilities or double up on any charges.

If the deal involves a family member, you also have to be particularly careful to ensure everything is done using fair values "at arm's length". Stamp duty will always be payable, no matter how you go about the purchase. This will be based on the purchase price of the land and the house. At the moment, the rate on land is 2pc and the rate on residential property is 1pc up to a value of €1m. Amounts in excess of €1m attract a rate of 2pc.

If you buy in your own name and then sell on the land to your brother, a liability to capital gains tax should not arise (assuming there is no increase in the value of the land or the price you charge him). However, depending on the legal form of the transaction, your brother could have a second liability to stamp duty on buying the land from you.

If you purchase the land and house jointly with your brother and then divide it afterwards, this might not give rise to a further charge to stamp duty. In summary, either approach should give the same result, but only if you get the legal forms right.

 

Brian Keegan is director of taxation with Chartered Accountants Ireland

Email your questions to lmcbride@independent.ie or write to: Your Questions, The Sunday Independent Business Section, 27-32 Talbot Street, Dublin 1.

While we will endeavour to place your questions with the most appropriate expert to answer your query, this column is a reader service and is not intended to replace professional advice.

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